The Australian Energy Market Commission has started consultation on an urgent change to the energy rules received from the Australian Energy Market Operator to ensure that financial settlement on the national electricity market continues seamlessly when regional demand is below a certain low threshold. 

The proposed rule change would provide a temporary solution to the risk of low demand before long-term changes are made as part of our work on facilitating the integration of energy storage systems, such as batteries, into the national electricity market (NEM).   

The Australian Energy Market Operator (AEMO) is responsible for the process of financial settlement for the purchase of electricity by market customers from electricity generators on the NEM. 

Because of its substantial rooftop solar penetration, South Australia is now at risk of negative net regional demand by spring 2021 -- that is, market customers could be producing more electricity than they are consuming from generators. This creates issues for AEMO as its settlement systems are unable to calculate non-energy costs, which include services to maintain stable frequency of the system, in circumstances where regional demand is less than 1 megawatt-hour (MWh). That is because the design of the non-energy cost allocations formulas and AEMO’s settlement systems did not anticipate a situation where rooftop solar generation flows would be so great that electricity demand would become net negative, as soon as it did.

When AEMO is unable to settle its non-energy costs, its integrated systems are also unable to settle all other markets, including electricity. This could disrupt the operation of the NEM. This also has consequences for how AEMO calculates the prudential requirements of market customers and how AEMO helps preserve the financial integrity of the energy market.

The AEMC today released a consultation paper on AEMO’s proposed temporary solution in the NEM settlement under low, zero and negative demand conditions rule change. This involves amending the rules so that when demand is less than 1 MWh during a trading interval, AEMO will use substitute values in its calculations. 

Submissions are invited from stakeholders on the matters identified in the consultation paper, and any other relevant issue by 20 May 2021. Written requests objecting to use of the expedited process need to be received by 6 May 2021. A final determination is expected to be published by 17 June 2021.

More information about AEMO’s rule change can be found here.

The AEMC is also consulting on a related proposed rule change from Infigen, which focuses on the risks from falling regional demand to market customers with positive net loads (that is, those consuming more electricity than they are generating). This rule change seeks to ensure that the burden of paying non-energy costs does not simply fall on an increasingly small pool of market customers with positive loads as regional demand decreases. It also seeks to ensure that AEMO does not over-recover for these costs and make payments to market customers with negative net loads. 

This Infigen rule change will also be open to submissions until 20 May 2021.

More information about Infigen’s rule change can be found here.

Media: Kellie Bisset, Media and Content Manager, 0438 490 041